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Minyan Mailbag: Economic Impact of Higher Energy Prices

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Thx John!

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.



Prof. Succo -


What value do you assign to the article,
(MORE rising energy costs), posted by Greg Collins?


If the answer is on the upper end of the scale...


When do you think the market will price in the economic impact, and how serious would you expect it to be? (stagflation?)


Minyan Jeff




MJ -


On the margin, it is of course a negative. There are many negatives on the margin at work in the market.


The one positive is monetary policy. Despite rhetoric by the Fed, they along with other major central banks continue to be extremely accommodative. Asian central banks continue to be willing, until forced otherwise by the markets, to accumulate foreign reserves in dollars. We have seen this willingness marginally decrease, but each time Asian currencies weaken against the dollar those declines are magically staid.

This one positive is enough to drive markets higher despite valuations or anything else. Until our bond market (I think signaled by a dropping dollar yen) begins to fray from the budget and trade deficits created by our easy monetary policy, stocks will not fall dramatically and may continue higher.


Regards,

Prof. Succo


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